Jun 29, 2015
From KPMG TaxWatch
On June 18, 2015, the Delaware Senate unanimously passed Senate Bill 141, which aims to further reform the state’s unclaimed property laws. The bill adopts various recommendations from the Delaware Unclaimed Property Task Force’s final report (issued last year) on improving the fairness and transparency of the state’s unclaimed property regime. Senate Bill 141 is the legislature’s second effort to implement the Task Force’s recommendations; certain improvements were captured in Senate Bill 11, which was signed into law January 29, 2015 (see related TWIST article here).
The most significant change, if enacted, would be to limit the lookback period for unclaimed property audits. Currently, Delaware may go back as far back as 1981 (34 years) when auditing a holder of unclaimed property. Senate Bill 141 would phase-in a reduction of the look-back period to 22 years. For any unclaimed property audit that is ongoing when the bill is enacted, the lookback period would be limited to 1986. For audits beginning after the law is enacted through 2016, the state could not look back further than 1991. Beginning January 1, 2017, the look-back period would be limited to 22 years from when the audit commences.
Further, Senate Bill 141 would require that, before initiating an audit, the state must notify the unclaimed property holder of its right to enter into a voluntary disclosure agreement (VDA). The holder would have sixty days to agree to a VDA before Delaware could audit. The look-back period for VDAs would be shorter than that of audits—generally 19 years—but still longer than the 10-year look-back period for unclaimed property in many other states. For the “shorter” 19-year look-back period to apply, the holder must generally complete a review of its records and make payment (or enter into a payment plan) within two years of filing its application for a VDA. Another provision of Senate Bill 141 would reinstate the imposition of interest on late or unremitted unclaimed property amounts reported and remitted on or after March 1, 2016, at a rate of 0.5 percent per month (not to exceed 25 percent of the unpaid amount). Recall, imposition of interest was eliminated in June 2014.
Finally, Senate Bill 141 would impose a new administrative burden on unclaimed property holders, by requiring that an employee—rather than a third party adviser—be named as the primary contact for all unclaimed property correspondence. In addition, the State Escheator would be required to send annual notices to holders, reminding the holder of their obligation to file unclaimed property reports prior to March 1. For more information on Senate Bill 141, please contact Dennis Prestia at 212-872-6891, Samantha Petersen at 303-382-7220, Angela Gholson at 212-872-7910, or Nina Renda at 973-912-6528.
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The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.